Agnico Eagle Mines Limited (AEM) Q3 2021 Earnings Report, Transcript and Summary

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kirkland Lake Gold Third Quarter 2021 Conference Call and Webcast. [Operator Instructions] Thank you. Mark Utting, Senior Vice President, Investor Relations, you may begin.

Thanks very much operator and welcome everyone to our third quarter 2021 conference call and webcast. With the timing of our planned merger with Agnico Eagle, which we are very excited about. This will likely be our last conference call. And I think if you looked at our results, you will agree with me that we are finishing with a bang. We got record earnings, extremely low unit costs and a continuation of industry leading -- an industry leading track record over the last 5 years for returning value to shareholders. We are going to talk about all these things on today’s call. With me today are most of the members of the Kirkland Lake senior executive team. Speaking today will be Tony Makuch, our President and CEO; David Soares, our Chief Financial Officer; Natasha Vaz, our Chief Operating Officer; Ion Hann, our Vice President of Australian Operations; Larry Lazeski, our Vice President, Detour Lake; and Evan Pelletier, our Vice President of Mining, Kirkland Lake; as well as Eric Kallio, our Senior Vice President of Exploration. Slides accompanying today’s presentation are available on our website and through the webcast. Following the presentation, we will open up the call for questions and answers. I will draw your attention to Slides 2 and 3 of the presentation, which contains our forward-looking information and other cautionary language. We will be making forward-looking statements in today’s call, so I ask you to get that information due consideration. We will also be referring to non-IFRS measures during the course of the call. Reconciliations involving those measures is provided starting on Page 37 of the MD&A we filed late yesterday. Finally, all dollar amounts mentioned today will be in U.S. dollars unless otherwise stated. With that, I'll turn the call over to Tony Makuch, President and CEO.

Okay. Thanks, Mark and thanks everybody for being on the call. It's not necessarily our last quarterly call, because we just have a different name maybe when we are talking to you in future quarters. But we have had lots of significant -- lots of success at Kirkland Lake Gold over the last few years, and definitely a very, very strong Q3. And we go through the results, and you can see lots of outperformance in a number of areas, particularly, Fosterville in Australia, where we’ve three quarters already achieved full year guidance and it continues to -- and it's not just grade, it's tons in grade coming out of Fosterville plus. It's very high-level of safety performance and operational performance and high attention to detail in terms of social issues there, we're doing a very great job in terms of the environmental cleanup that's going on up in the Northern Territory of Australia and build tribute to the leadership, but all the people that the whole, the whole number -- the whole people that are working for us in Australia is doing an exceptionally good job and we really need to thank them for what they do. And then over in Canada, we have a significant success and significant success in Q3. And again Detour had to have a very exceptional competitive record in Q3, but we had very exceptional Q4 as well, and, again, the demonstration of a strong leadership in the company. [indiscernible] from corporate breakdown through the operations, and fundamentally the people driving the trucks that people doing the work at Macassa and at Detour and really making a big difference. Again, really thank them for what they work on to achieve in the quarter. And as we say, we're looking at a very strong Q4 as well as to finish off the year. And we'll start on Slide 4 here and then just had a -- highlight a few things. We did have a recent announcement of an agreement to combine a merger with Agnico Eagle Mines. From our perspective, it's a very exciting development for our company and our belief and our shareholders. And big thing is this merger creates a new leader in the global gold mining industry. And if you know, we create a gold mining company that can definitely be a leader in terms of transforming their -- normally transform the industry, but also transforming changing the perception of our industry as we move forward. Moving to Slide 5, its basically to give some of the highlights of our merger with Agnico. But basically, we're creating the highest quality senior gold producer with the lowest unit costs. Best risk profile, leading in key areas of ESG and an extensive project pipeline to drive future growth. The combined companies have significant very strong financial strength, an extensive pipeline of projects to and combined with a strong balance sheet, good solid operations that are performing well and profitable, we definitely see the opportunity to fund future growth internally. The merger and consolidation, a big thing consolidation activity region of Northeastern Ontario, Northwestern Quebec to provide significant value creation and opportunity through synergies. And then, we see some other business improvement initiatives and I think one of the biggest things from our perspective is the development of the new [indiscernible] Kirkland property sort of amalgamating that into the Macassa operations in Kirkland Lake and does a significant benefit to Northeastern Ontario, and definitely for the shareholders of the -- to Agnico Eagle. And we see the new Agnico Eagle, definitely being and all the way we got to demonstrate it. But if you warrant a premium valuation, and fundamentally what will drive that combination of increased scale, low cost and low-risk operations, but I think fundamentally superior financial performance, and continued strong balance sheets trends and good execution of operating -- of results will be key to driving that value. That's one premium valuation. And we see it as a right deal for a company and our people at the time and as well as our shareholders, communities and all the stakeholders groups in the company that had to deal with. If we move on to Slide number 6 and start talking about quarter -- third quarter results. Slide 6, really again we are focusing here and maybe give it a quick update on our responsible mining efforts. For us, responsible mining is integral to everything we do and is ingrained in our culture. All of our Canadian operations participated in the first National Day for Truth and Reconciliation. We're learning seminars for all employees, supporting and [indiscernible] doing things to support local indigenous companies to orange shirt programs and painting one of our 795 truck at Detour like orange. Additionally, all truck fleets were painted green to support mental health awareness with seminars and employee training programs at the health of Oak Canyon Boot Camp in Australia. In Bendigo, Australia we commit to $600,000 to Gobbé Wellness Center and Cancer Wellness Program to assist with the sustainability of the program and expanding wellness services and improving access for regional patients. Building on our leadership and minimizing and reducing corporate admissions, we took additional steps in Q3 2021 to achieve further reductions, including testing and building an energy storage system from entirely recycled components, including the battery case and batteries from our [indiscernible]. Turning to our financial and operating results on Slide 7. As I mentioned, Q3 2021 was a quarter to financial progress. The main highlights are, Mark alluded to some at the beginning, but record quarterly earnings, solid year-over-year production growth, unit cost significantly better than full year guidance and strong cash flow generation. Record performance was driven by strong operating results, including quarterly production, throughputs, and all in-sustaining costs at Detour Lake. Q3 was a tremendous quarter for Deep Lake production. It was 189,000 pounds, and that beat the previous record of 166,000 ounces in Q2 of this year, by 23,000 ounces of 14%. And, as I said, we're on track for a new record in Q4 of this year. Fosterville also had a very strong quarter and a strong contributor to record results. And it was a combination of grade outperformance as well as higher levels of throughput through the balance of the operation [indiscernible] very successful in terms of moving forward at Fosterville. The [indiscernible] driving our -- having a TV record production performance, it also helps in terms of our unit costs, and in our unit costs in Q2 -- in Q3 Detour [ph]] full year guidance ranges. We are also being impacted by -- we are being impacted by the exchange rates and inflation pressures in certain areas. But our operations are doing very, very well in managing these costs. And we're in very good shape to meet our values for the year. In terms of cash flow, we had operating cash flow of $323 million and free cash flow of $141 million. David Soares will give a little more color on those areas. Turning to Slide 8, we continue to have a very strong balance sheet with cash at September 30 of $822 million. Again, very clean balance sheet and no debt. We also continued on a very successful track record returning capital to shareholders. During Q3, we returned $175.3 million, $50 million through Q2 d1ividends paid on July 14 and $125.3 million to that we purchased 3.1 million shares through our NCIB. Turning to Slide 9, a significant component of our successful track record with capital allocation was investing capital for future value creation. We released encouraging exploration results of all three of our cornerstone assets remain on track with our key growth projects. Eric Kallio will give a little bit more in color on that. But maybe I'll just talk a few things here as you know, you don't see exploration, a lot of success in vaccination program at Detour. When we -- within early September, we announced the 10.1 million ounce increase in open pit measured and indicated resources [indiscernible] that tripled the open pit M&A resources. And it was -- at Detour we see it as -- was definitely a milestone in terms of being able to support strong growth in mineral reserves in the future. And that's going to come out next year as we complete our studies this year. And earlier this week, we announced additional new drill results. And all these continue to highlight the fact that, 10 million ounces increase in resources is not the end of it all. We still see the potential to continue to grow the resource at Detour before the end of this year. And then 3D supports what we were we what we give in terms of our view and the view we put out of the door when we acquired it back in -- made the acquisition announcement back in 2019. Beside the exploration success at Detour, we are making very good progress with a lot of other projects at the mine in terms of value creation, and optimizing the operation, and that included -- we increasing the throughput in the mill. Actually the mill in July and August of Q3 actually was running at a rate at almost 20 million tons per year. We had that significant improvements in grade management at Detour. And we have a lot of other infrastructure that we are installing at Detour that really helps in terms of build the operation for the long-term and really support future improvements both in operating performance, but also in safety and care and consideration for people and for the [indiscernible]. At Macassa, the #4 Shaft been ahead of schedule on track for completion later this year. We also had -- sorry, that’s [indiscernible] completion of the sinking later this year, the actual installation of [indiscernible] and getting data ore handling system and to change over from a sinking plan to production plan will be started and we expect that shaft to come into full production or be ready for production in Q4 into Q3 -- in Q4 2022. We also have significant increase of success at Macassa expanding the South Mine Complex and identifying new areas of high grade mineralization on both the Amalgamated and Main Breaks. And looking at Fosterville, we did come up with some very new and interesting exploration results that released at the end of August. And I guess what it tells you there's potential for continued discovery of new high grade intercepts and our goal at Fosterville is to demonstrate an operation of 300,000 to 425,000 ounces a year on an annual basis for 7 to 10 years on production. I think we're definitely we have lots of work to do, but we definitely feel confident that we'll be able to achieve that -- demonstrate that to shareholders. Now moving on to Slide 10, this is looking at our year-to-date results. We had a solid year-to-date operating first full year guidance. Production with just under 1.1 million ounces, a 5% increase from year-to-date 2020. We achieved a very solid unit cost performance, record earnings and strong cash flow generation. You can also see that on the slide that so far this year we have repurchased 4.5 million shares for close to $184 million. We returned 300 -- $334 million to shareholder, which represents $1.28 per share, and $317 per ounce produced in year-to-date 2021. Now on Slide 11, let's look a bit closer at a track record of returning capital to shareholders. We have now returned a total of $1.36 billion to shareholders since we first introduced our NCID in May 2017 and our dividend policy in March 2017. Of this amount, just over a $1 billion was used to repurchase 31. million common shares and $315 million was used to make 17 quarterly dividend payments. Those dividend payments have increased 7x since we began issuing them in 2017. In addition, since mid 2016, we have eliminated $190 million of debt. This includes paying $98 million of debt held by Detour Gold Corporation shortly after it was acquired in January 31, 2020. $30 million was also used to close out Detour's hedge position. We're in a very -- return on that $30 million, given the changes in gold and commodity prices and FX rates that follow in 2020 and into 2021. We also repurchased at RSA a 1% NSR at Macassa from [indiscernible] Nevada in 2016 for almost -- just over -- almost $36 million. Adding it all up in aggregate, we have provided $1.6 billion of value to shareholders since mid 2016. And we've done all this while also building the industry strongest in [indiscernible]. Looking at Slide 12, it shows our performance against guidance. As you can see, we are very well-positioned to achieve our guidance entering the last quarter of the year. We are targeting the top end of our guidance -- production guidance and on track to achieve our operating cash cost per ounce guidance. We're doing very well in terms of all-in sustaining cost per ounce solid at $785 year-to-date, almost any cost is better than our guidance. We definitely expect to meet and should beat our all-in sustaining costs guidance for the year and that’s in spite of inflationary pressures related to fuel and power cut energy costs and the change in the FX rates without an impact. Looking at our expenditures, you can take sustaining and growth capital expenditures together. Total CapEx guidance is $530 million to $585 million for the year and we are tracking to be in line with that range. Also expiration spending should be in the low end of our guidance of $170 million to $190 million for the year. And that the lower end of achieving the expiration guidance is mainly a function of lack of -- get access to drills and get access to a lot of equipment into the work that we can't get people to manage the drills, and that's been a challenge for our industry going into 2022. Anyway, with that, I'll turn the call over to David Soares, our CFO.

Thank you, Tony, and good morning, everyone. I will start on Slide 13. In Q3 2021, we achieve record net earnings of $254.9 million or $0.96 per share. This represents 26% increase from $202 million in Q3 2020 and 4% increase from $244.2 million from the previous quarter. The increase from both prior year -- prior quarter and prior year resulted mainly from higher revenues. Adjusted net earnings totaled $241.3 million or $0.91 per share. The main difference between adjusted net earnings per share of $0.91 and net earnings per share of $0.96 in Q3 2021 was mainly related to the exclusion of $15.6 million net tax recoveries, resulting from the optimization of discretionary deductions for Ontario Mining Tax on filing the 2020 tax returns. Foreign exchange gains cost attributed to non-operating assets mainly in Northern Territory, system implementation costs as well as COVID-19 related costs. Turning to Slide 14. In Q3 2021, revenue totaled $667 million. The change from Q2 2021 is mainly driven by an 8,000 ounce increase in sales volume, which was partially offset by lower realizable oil price in the quarter. Compared with Q3 2020, revenue increased by $34 million or 5% year-over-year, mainly due to a higher gold sales volume, which increased from 332,000 ounces in Q3 2020 to 372.1000 ounces in Q3 of 2021 with the increase largely reflecting record gold production at Detour Lake and strong production and Fosterville, partly offset by unfavorable impacts from low -- the lower average gold prices. Moving to the next slide and looking at EBITDA, on Slide 15. Q3 2021, EBITDA totaled $451.6 million, which was comparable to Q2 EBITDA of $451.3 million. Compared with the same period in 2020, EBITDA increased by $67 million, mainly as a result of higher revenues. Looking at income taxes, our Q3 2021 net earnings benefited from a lower effective tax rate of 25.3% versus 31.6% in Q3 2020, mainly as a result of the $15.6 million net tax recovery related to the optimization of the eligible tax deductions for Ontario Mining Tax, following a restructuring of the company's Canadian entities early in 2021. Moving e on to Slide 16, we look at the Q3 cash flows. You can see that the largest contributor to growth in cash was from our operations, which generated about $396 million of cash. This is before income tax paid of $78 million, growth capital investment of $88.5 million and exploration spending of $39.4 million in the quarter. Other cash outflows include costs incurred at our non-operating sites, mainly the NT and Holt Complex of $15 million and corporate G&A of $14.3 million. During the quarter, $175.3 million was returned to shareholders, including $125.3 million used to repurchase shares through the company's NCIB and $50 million of dividend payments. Turning to Slide 17, to look at our cash balance and cash flow on a year-to-date basis. We generated nearly $1.1 billion of cash flows from our mining operations after sustaining capital. We paid $298 million of income taxes. We invested in our key assets [technical difficulty] $217 million in growth capital and $120 million in exploration expenditures. We would have accumulated any cash balance from nearly $1.2 billion before returning $334 million of capital to shareholders, comprising about $184 million used to repurchase shares and a 150 in dividends paid on a year-to-date basis, ending the quarter with $822. 4 million in cash. Next, I will turn it over to our COO, Natasha Vaz to discuss our operating results.

Thank you, David, and good morning, everyone. I'm on Slide 18, which outlines a consolidated production results for the quarter and year-to-date. So overall, as Tony mentioned earlier, we achieved solid operating results in the quarter with production just over 370,000 ounces, compared to 339,584 ounces in Q3 2020. And a quarterly record production of 379,195 ounces the previous quarter. Our operating cash costs per ounce sold was $438 an ounce which is well below our full year guidance. And then as per AISC per ounce sold, it was also very strong at $740 an ounce. This is a 16% improvement from Q3 2020 and 5% better than the previous quarter. The $740 an ounce also compares very favorably to our full year guidance range of $790 to $810 an ounce. And then when we look at our year-to-date operating results, Detour very strong. Year-to-date production totaled 1.5 million ounces, which is a 5% increase from year-to-date 2020. Our operating cash cost per ounce sold was $466 an ounce compared to $407 in year-to-date 2020. And finally, our AISC per ounce sold was $785 an ounce versus 804 in year-to-date 2020. So with that, we'll now get into a little more detail on the operation. And I'll turn the call over to Ion Hann, our Vice President of Australian Operations to provide an update on Fosterville.

Thanks, Natasha. I'll start with Fosterville on Slide 19. As you have heard, Fosterville had a very strong Q3. Fosterville produced 135,000 ounces in Q3 2021 based on processing just over 180,000 tons at an average grade of 23.6 grams a ton and average mill recoveries of 98.7%. Production in Q3 2021 exceeded expected levels mainly due to continued grade outperformance in the Swan Zone. For the year-to-date, we produced 401.4000 ounces significantly higher than target levels, largely reflecting grade outperformance in a moldable Swan Zone stopes during year-to-date, as well as some changes of sequencing involving moving higher grade stopes from Q4 into Q2 earlier in the year. Production in year-to-date 2021 compared to production of 476,000 ounces for year-to-date 2020, the reduction reflecting a lower average grade consistent with the previously stated plan to reduce production with the intention of creating a more sustainable operation, while we continue our extensive exploration programs. Partially offsetting the impact of a planned reduction in the average grade was a 28% increase in tons processed, to just under 525,000 tonnes year-to-date 2021. Turning to costs. Again, we achieved a very strong performance for both Q3 and year-to-date. For Q3, we had operating cash costs of $170 an ounce, and all-in sustaining costs of $337 an ounce. For the year-to-date, operating cash costs average $184 an ounce with all-in sustaining costs of $367 an ounce. I will now turn the call to Larry Lazeski, General Manager and Vice President of Detour Lake Mine.

Thanks, Jim. We'll start on Slide 20. As Tony mentioned earlier, quarter three was an outstanding quarter for Detour Lake. We achieved record quarterly production in Q3 of 189,000 ounces, based on processing 6.2 million tons at an average grade of 1.04 grams per ton and average recoveries of 91.6%. This is an increase of 35% from Q3 2020, and an increase of 14% from the previous quarterly record of 166,000 ounces in Q2. The quarter-over-quarter increase was largely due to a 5% increase in tons processed as well as an 8% improvement in the average grade. Mining during the quarter focus largely on high grade areas as part of the Phase 2 mining plan. For year-to-date 2021, we produced 501.8000 ounces, which is 38% higher than the 8 months after the acquisition last year, and a 22% increase from the full 9 months of year-to-date 2020. Looking at our operating cash costs, we average $601 in Q3, and $647 per ounce for the year-to-date. Very importantly, the mine achieved record all-in sustaining costs of $937 per ounce sold. Our strong costs performance was achieved despite some inflationary pressures we've seen on diesel, fuel and energy and in a few other areas. We continue to work on mitigating the impact of those costs pressures. Moving to Slide 21. As Tony mentioned earlier, we have a significant number of projects on the Detour Lake. Our growth capital expenditures at Detour for the first 9 months of the year totaled $137 million. Of that amount, $66 million was for deferred stripping and $70 million was for the procurement of mobile equipment and projects involving tailings management area, process plants as well as construction of a new assay lab in Airfield. With that, I will turn the call over to Evan Pelletier, Vice President, Mining-Kirkland Lake.

Thanks, Larry. I'm starting on Slide 22. Production at Macassa in Q3 totaled 46,000 ounces at an operating cash costs of $657 and an all-in sustaining costs of $859. The increase in production from Q3 2020, mainly reflected a higher average grade in Q3 2021, compared to the same period a year earlier. The reduction in production from Q2 2021 reflected lower tons processed due to largely to higher levels of underground maintenance and reduced equipment availability, as well as the impact of the lower than planned average grade due to mainly -- due mainly to mining sequencing. Looking at year-to-date production at Macassa totaled 148,854 ounces based on processing 243,615 tons and at an average grade of 19.4 grams per ton and average recoveries of 98%. Production year-to-date is lower than planned with underperformance being due largely to reduced equipment availability caused by increased maintenance, requirements, poor battery performance and delay in receiving new batteries. Moving to Slide 23, where we are doing very well at Macassa. Its advancing our key projects mainly #4 Shaft as well as with exploration which I know Eric talked about in last quarter's call. Looking at #4 Shaft during Q3 2021, the Shaft advanced approximately 500 feet and had reached a depth of 6,100 feet as of September 30, 2021. With development of the 6,100 level station also being completed. We also have made good progress with other projects such as our ventilation expansion involving completing of the two vent raises. With that, I will turn the call back to Natasha Vaz.

Thanks, Evan. To wrap up the operating review, I'll look at the outlook for the full year, I'm on Slide 24. On a consolidated basis, Tony has already touched on it and as he mentioned, we are on track to achieve the top of our production guidance of 1.31 to $1.4 million ounces. Operating cash costs per ounce is on track to achieve guidance. And we are positioned to either reach or to potentially even beat our all-in sustaining costs per ounce guidance. Okay, so just looking at the individual operations. Fosterville achieved its full year guidance in the first 9 months of the year. So we're now expecting Fosterville to produce around 500,000 ounces for the year or higher. Also with respect to operating cash costs per ounce, we should easily beat the guidance range of $230 to $250 an ounce. Over at Detour, we are targeting another record quarter in Q4 with production to exceed the Q3 level of 180,000 -- 189,000 ounces. So we now expect production for the year of at least 700,000 ounces with operating cash costs at the top end of our guidance range or slightly higher. And then over at Macassa, we are already seeing improved results in Q4. Having said that, we're not expecting to achieve our guidance with production now trying to be within 190,000 and 210,000 ounces at operating cash costs above the guidance range. With that, I'll turn the call over to Eric Kallio, our Senior Vice President of Exploration.

Hey, thanks, Natasha and good morning, everyone. The first slide today is number 25 from Detour Lake project where we continue to have tremendous success with both drilling and advancement of the resource. With the peak product being an updated resource and substantial increase in ounces from our latest year-end. [indiscernible] from the estimates shown on the current slide, which is a long section looking northwards across the project area containing pit shells for both the new and the older work. As indicated, the updated resource has added approximately 10.1 million ounces to overall total and bringing the new total to about 14.7 million ounces exclusive of reserves, which at year-end were about 15 million. All this material lies in a pit shell which is measuring about four kilometers long and extending to about a maximum depth of 600 meters from surface, with all reserves located at the top shaded in the dark green and all the resources lined below and shaded in yellow and lighter green, which is essentially covering the whole Saddle and West Pit areas for the main focus of our recent drilling. Important to note is all this increases accomplishments only about 180,000 meters of drilling, or two-thirds of the planned 270,000 meter program started last year. And the limits of the test are really close to the limits of drillings and we are still seeing goodwill at those limits. So now turning to my next slide, number 26, what we see here is another [indiscernible] Detour illustrating additional details from the resource model, along with new drills drilled released just two days ago, and already demonstrating additional upside potential here. As announced, the new results include an additional 39 holes and 6 wedge holes targeting mainly towards the West Pit. And in our view, containing a lot of very good positive messages, including reinforcement of our overall geological model of [indiscernible], it's a very positive drilling [indiscernible] Some of the key holes to know from the delay include a cluster from my view would be cluster holes on the west side of the current pit shells, where there was very limited drilling in the past. And now containing some wide -- wider and higher grade intercepts, as well as hole number 300, which is more in the central part of the West Pit, which is actually drilled under the north wall of the pit, and also having good intercepts. The other good [indiscernible] I'd like to point out is number hole 295 located in the Eastern part of the Saddle, which intercepted 20 grams over 25 meters. So just [indiscernible] West Wall of the main pit. [Indiscernible] all above is the fact that we still have another 12 [indiscernible] on site, continuing the program, and we actually are feeling very confident about the project. And our possibilities give more emphasis by the time when you do the next update. Now turning to my next slide, which is number 27. We see the first four slides were named Fosterville and where we also saw some very good success in Q3, including multiple high grade intercepts for both the lower Phoenix and Robbin’s Hill areas. In terms of the [indiscernible] hand, what we see is long section across the mine area and showing the location of these two main targets, as well as some details for our '21 exploration program. Dedicated to lower Phoenix is on the left hand slide as two main targets within the Swan and Cygnet, and most of the work at this time being focused on the Swan, and down punch extension of mineralization from current reserves. For Cygnet, the second zone located 100 meters in the footwall and it's also an important target here. Important to note is that until early part of this year, most of the work at Swan was not freely available to us, but only became more available when the new drill was finished in June. And now we have five drills at this location and able to do a lot of drilling in this area. In addition to this, we also now have a lot of drilling happening at Robbin's Hill. And as with Swan area, the main target is down-plunge from the reserves. Most of the work to date is -- has been done from surface. As you can see, we are still continuing to advance the underground Detour line and getting very close to be able to start drilling from underground. Turning to the next slide, we can see some additional details for the work that's happening at the Swan Zone, the Lower Phoenix area. And key things to note here would be we're starting to get a large number of holes, 109 holes we're actually released in early -- in our last press release here. And the following holes are showing a fairly consistent trend down-plunge from the reserve. We're also seeing some very lightweight intercepts, [indiscernible] the limit of the reserves, including 51.7 grams over 2.6 meters, 12.8 over 4.6, 9.6 over 6.4. So in addition to that, what we've seen is high-grade intercepts within the trend 14.1 over 7.5, 10 over 10.4, 13.2 over 3.2. So in our view offering additional potential for high-grade lenses within the overall trend. So turning to my next slide. This is just showing a little bit more detail for the drilling, which is happening at the Cygnet area. And as indicated -- as with the Swan drilling, we've got quite a few new holes located within this area now and from the new drilling, seeing a lot of new high-grade intercepts, some of the key ones being 258 grams or 1.8, 142 or 2 meters and 49 -- 494 or 4.1. Key part of this drilling though has been not only the [indiscernible] results, but [indiscernible] I think of parallel sub splays coming from the main -- from the main structure which we identified in the past, with the keywords being [indiscernible]. And these are defined -- these are shown on the left hand side of the slide. And as you can see, these are more directly aligned with the Swan and containing some of the higher grade intercepts. So, very important developments, I think. Turning to my next slide, which is from the Robin's Hill area. As you can see here, we're also starting to get quite a few drilling intercepts and now holes extending down to about a 1,000 meters down-plunge. And this -- and as announced in our last press release, seeing some very favorable results right near the limiters of the [indiscernible] to 1,000 meter level very close to the elevation where Swan started to look better. We're seeing holes that have Quartz Visible-Gold, and numbers which are much higher grades than the average that we saw at higher elevations, including 28 grams over 1.1, 23 over 1.4, 30 -- and 19 over 3.4. At the Swan, we are also seeing some very high-grade numbers within the trend, such as 81 grams over 2.5 meters, which again suggests the possibility of high-grade lenses. So, all in all, we believe that the work at Fosterville come along very well, and lot of possibilities for not only replacing ounces, but coming up with new high-grade material. And now, I will pass it over to Tony.

Okay. Thanks, Eric. And I'm turning now to Slide 31, final slide deck. And then -- and to conclude, as you can see, we had an excellent quarter in Q3 2021. And which are besides operating results, we also had to highlight the quarter in terms of the merger announcement within Agnico Eagle, which will create a new leader in gold mining industry. And again, as we talked about the lowest cost, highest margin, best jurisdictions, and an extensive pipeline of development and exploration projects to drive sustainable, low-risk growth. And with a very, very strong balance sheet and strong and [indiscernible] was depth of people to create that value for shareholders. Q3 was a record quarter in both earnings and earnings per share for Kirkland Gold. And as outlined, Detour Lake had a truly outstanding quarter with record earnings, throughput in all-in sustaining costs. Fosterville continued outperformance within -- it continue to outperform and the Shaft #4 quarter [indiscernible] remains on track for completion in late 2022. And that would be helpful in terms of that and combined with that, plus the new ventilation system at Macassa plus, the new fleet of equipment as we move into 2023 will retransform Macassa into a [indiscernible] mine. Eric outlined our success. It's a drill bit that continues deep part of our value creation and you can he is doing at each one of our assets, each one of our mines. Looking ahead, as Natasha gave some color too, we're on track to finish 2021 strong and to evolve our 2021 guidance. We are also looking forward to moving into 2022 as part of a new world's leading great coal mining company. And it's one that's well-positioned to generate secure long-term value for shareholders. But before I finish, on [indiscernible] November 4, and yes, we’re -- when we talk about [indiscernible] we are having strong attrition of production success coming into Q4, but we are also at the start of the hot Christmas season. You're in [indiscernible] maybe it says everyone within Kirkland Gold, our suppliers, contractors, those on the call, please remain diligent for your own personal safety and safety of others as we end the year. We don't really want anybody to get hurt, you know, no ounce of gold produced, nope, no dollar in cash flow, no penny and earnings is more important than your personal safety and personal safety of the people. You work with everybody and end the year here be able to be with your families over the Christmas season. Anyway, with that, we will take some questions. Thanks.

[Operator Instructions] And our first question is from Tyler Langton with J.P. Morgan. Your line is open.

Good morning. Thanks for taking my questions. Maybe just to start, if you talk about the sort of the levels of cost inflation that you're seeing right now, and sort of what you're seeing in the areas for materials and labor and fuel. And then just kind of talk a little bit about your expectations, heading into 2022.

Sorry, the first part, I just sort of missed a little bit of the first part of the question, but it was -- you’re asking about what we're seeing in terms of labor inflation is what -- is that correct?

Yes, cost -- the cost of inflation you're seeing now and just from -- whether it's from materials, consumables, labor, fuel, just kind of sort of a different buckets.

I mean, we don't see anything on to do with labor. I mean, labor t follows track that we normally see year-over-year in terms of net labor costs, but, again, part of it all is, as we train and develop people and people earn more, they become more productive and create more value. So, all of that gets offset. So people earn to pay that they get. The increases in pay, it's always money well spent in those areas. We are happy to do it. In terms of commodity prices, I mean, I think some of the big areas, I can get Natasha and Ion and Larry to give a little more color, but some of the big areas as we talked about is, in our forecast where diesel was at [indiscernible] with diesel prices have gone, some energy prices costs where we see that and a few other commodities, definitely the FX rates have had some impact on us. But as you can see our operations been able to [indiscernible] whether that and form well, and probably would have -- we would have -- as commodity prices would have stayed the same. We probably would have been at a significant beat in our cost items. But either Natasha or Ion there.

Yes, basically -- Hi, Tyler. In q3 2021, yes, we have seen some inflationary cost pressures as Tony mentioned, mainly in diesel and electricity and things like [indiscernible] media. It has mainly impacted us like Detour. There have been some supply chain issues, as Evan mentioned, particularly with batteries and battery powered equipment. But through effective cost management and higher-than-planned gold sales largely at Fosterville, our operating cash costs per ounce and also our AISC sold in Q3 2021 was significantly better than the full year 2021 guidance ranges, right. And then -- so looking forward into 2022, we expect inflationary pressures for energy and consumables to continue. And while difficult to predict, I guess we can safely say that we're focusing on working to mitigate that and focusing on cost management as we [indiscernible].

Great. And just as a final question. At Macassa, you kind of -- you mentioned some of the issues that impacted production in Q3 And you said they were getting -- you're seeing improvement now in Q4. I mean, these issues largely be resolved in Q4, or could they sort of slip into Q1 of next year?

Sure. Well, yes, so the underperformance we've seen at Macassa is again mainly related to equipment availability caused by increased maintenance requirements and also poor battery performance and delays in receiving the new battery. So, the battery truck industry is relatively new, as you know. And with demand soaring, we are seeing tightness in the market as well as some issues with quality. So the battery like we are getting at mobile equipment is down in some cases, 2 to 6 months instead of years. We are seeing some better results in Q4 so far. So it is encouraging. We are working with our suppliers hand-in-hand to try and resolve these issues as soon as possible. So it doesn't impact us as much going into future quarters.

Yes, if we went back a few years ago, Macassa was the leader in battery technology, battery equipment, I saw it underground. We were really the only consumer of the batteries. And so we were getting the quality and timely delivery and effectiveness of them. But now as the industry is picking up and more of the industry is asking for this equipment, the supply industry is not able to match and all of a sudden now that you're seeing a drop in quality, as well as the timing and delivery and even availability is exceeded. And we need to refer the supply industry to catch up. We're going to be working on -- we're working on a number of initiatives there to [indiscernible].

Great. That’s it for me. Thanks.

Our next question is from Ovais Habib with Scotiabank. Your line is open.

Thanks, operator. Hi, Tony and Kirkland team and congrats on a strong quarter. And really, thanks for taking my questions. Couple of questions for me. And I apologize in advance if you've already touched upon these. Several companies reported updates this morning, and I'm trying to multitask as best as I can. So my first question is regards to Fosterville. Now, obviously, Fosterville had a fantastic year. Q3 production beat as possible kind of continues to -- on the grade outperformance. You have made changes to the mine sequencing essentially bringing higher grade forward. But at the same time, you've seen some -- seem to be getting some significant positive grid reconciliation as well. Are you expecting this to continue into 2022? And are you modeling this positive grid conciliation in Q4?

Ion, you probably can have a real good answer to this question. Is that fair?

Yes, sure, Tony. It's a good question. So the grade outperformance so far we've seen this year is really only come from three stopes mainly. And those three stopes account for essentially about 60,000 ounces of the outperformance so far this year. So we don't see the broad range of stopes in Swan are modeled really well and reconciled really well. We do have the odd really, really extreme grade areas that are really difficult to model, to be honest. And it takes very small variation in physical size of [indiscernible] to add significant answers into the equation for the stopes. So do we see it continuing? We have seen a little bit of outperformance already in Q4. But having said that, over the year, we're really only talking about three main stopes. As for the sequencing changes, driven by mine sequencing at the start of the year. So these decisions were made in Q1 leading into Q2. Some it had the effect of dragging some higher grade stopes from Q4 into Q2 as compared to the original plan. But really, the main contributor for the year has been those sort of three stopes that outperformed significantly. Does that answer the question?

Yes, it does. And just kind of follow-up on that, are you looking to kind of tighten up drilling or do some additional grade control really to kind of tighten up that model? Or is this positive reconciliation you're just taking it as it comes?

Yes, good question. The drilling that we would need to be at a really pinpoint, the very -- what really very small physical changes in vein width and/or gradation. We'll be talking about, 5x5 sort of drilling size. So we don't intend to do that. And we understand the geological setting where these types of really extreme outperformances can occur, and we'll be looking to try and model that as best we can going forward. I'll reiterate that the vast majority of this Swan reconciles really well to model. It's just the odd stope will be tend to have a bit of a footwall splay to it that significantly outperforms.

Got it.

Evan, [indiscernible] are you still are expecting a pretty solid 2022 coming into it, right?

Certainly. Certainly, Tony. Yes, yes. We see 2022 still being a very strong year for Fosterville.

Perfect. That's [indiscernible]. And just shifting gears to Detour, it was great to see throughput moving higher in Q3 to 7,000 tons per day. And really to meet the target of that 24.5 million tonnes for the year, you need to process around that 70,000 to 73,000 tons per day in Q4? Now, do you need any additional equipment or any additions to the plan to achieve this? Or are you on track? Any color you can provide in how October is progressing?

You can answer that question, Larry or Natasha.

Sure. I can start and then Larry can finish. Yes, overall, we're in a really good shape in Q4 from a line perspective. We have good material and we're on target to [indiscernible] in the quarter. The mill is shaping up to be very good. We have a small shutdown, a plant in the quarter but nothing material. So from a plant perspective, and from a mine perspective, we're in good shape to hit our target. Larry, you want to add some more color?

Yes, sure. In fact, it's we're very optimistic that we're going to finish strong. In Q4, we've already got a good start in October. As we mine through some higher grade zones in Phase 2, that's going to continue not just this quarter, but into the next year. So from the mining end, we're in pretty good shape. And actually, as -- we haven't even seen the benefits of the growth projects up front end into the mill yet. So things are looking pretty strong for [indiscernible] to finish the years. So the team has worked really hard to make some operational improvements. So the increase in throughput is actually not through our growth projects yet as they come online this quarter and into next year should only help us and [indiscernible] or tonnage. Thanks.

Yes, a lot of the success from a throughput point of view it [indiscernible]. It's a lot of initiatives, a lot of small initiatives. It's like a lot of the big projects or stuff to come in 2022, right.

Perfect. That's a great update. And just to confirm, in terms of the grid, I mean, grid moved up over a gram ton in Q3. And is that expected to remain around the gram per ton going into Q4 as well?

Go ahead, Larry or Natasha.

Yes, absolutely. And again, Phase 2, we're kind of right in the heart of the ore body right now going to the underground areas and we expect to be in and around the gram per ton, maybe a little better.

Perfect. And that's great, and really appreciate the color. That's it for me. Thank you.

Our next question is from John Tumazos with John Tumazos Independent Research. Your line is open.

Thank you. I know you provided some explanation. I wanted to give you a chance to explain a little more, the tremendous 67,368 tons a day through the mill of Detour. I'm assuming that it wasn't softer rock. And part of it was a significant increase in uptime due to better maintenance practices and infrastructure improvements. And it's -- some of it was due to specific, relatively small capital improvements that don't stand out on the cash flow statement that obviously had a big impact. Please tell us how you did such a great job.

How about Natasha?

Yes, [indiscernible] but -- hi, John. So there are some initiatives that we've been working on with respect to drill blast and getting higher fragmentation. We did have -- we did see some opportunity where we recovered some within the areas of [indiscernible] area, so it is better material. There's some work being done on the mill side with respect to choke feeding and filling that up. Larry, do you want to add any more details associated with that?

Yes, sure. I think, Natasha, you nailed most of it there. It's really focused around optimizing our high intensity feed. High intensity blast said, so we are producing more [indiscernible]. And yes, it is just as hard as it ever has been. But so you got that, the choke feeding and really just the team working together between the mine and the mill and making sure that the feed is consistent. And actually on uptime, we did have two plant shutdowns in Q3 with only one in Q4. So we …

Yes, on time was not a factor, you actually have more downtime.

Yes, that's correct.

Congratulations.

Our next question is from Mark Parkin with National Bank Financial. Your line is open.

Thanks, guys. Congrats on the good quarter. It's certainly been the focus of the call. But on Detour, can you just give us an idea of like where you're seeing -- what's the bottleneck currently? Is it more the mine is [indiscernible], or it's more on the mining side? Is it minor mill that you're kind of focused on near-term in terms of unlocking the next step of throughput upside?

Go ahead, Natasha.

Sure, sure. So I think the mine is producing in pretty good weight, and the mill is doing the front end, it's doing very well. I would say if we wanted to increase throughput going forward into the future, even further, I would say it would be the back end in terms of the CIP circuit and debottlenecking back, and that's part of the projects that Larry and his team are working on to get established and commissioned later next year. Larry, any more color?

No, that's good. That's -- our focus will be in the first half of next year for sure is in the back end of the plan.

Yes, but in terms of mine throughput, and if you will get the updated mine plan that [indiscernible]. And as we progress into 20 [indiscernible] we increase mine throughput, my hope was we're going to be adding trucks to add -- support adding trucks, we're going to -- we need shops and things on site. So there's that we are looking at a new infrastructure in terms of putting a private LTE network, that partnership for broadband communications to do that. And then we take advantage of technology on site. So a lot of those initiatives that will help in terms of increasing throughput, plus, as we go into the larger concept that gives you more geography to work with, and a lot more and more flexibility in terms of less delays, in terms of equipment moving around, etcetera. So, there's a lot of these things that are going to come and as Natasha and Larry mentioned, in terms of the plant, we're working on the front end to prove throughput through the crushers into the site mill, and that's part of that is the screens, and then every feed system. And then on -- and then getting more tons to the mill is good. But if we don't -- not at the expensive recovery, and that's where as an attachment we're working on improvements that are -- expansion of our deep circuit, our CIP circuit, as well as the new gravity circuits as additional gravity circuit being added to the mill over the next while.

All right. Thanks for those details. Two other things is, historically, we saw loading rates in terms of what a truck could actually be loaded to versus what it was actually being loaded to. That was kind of a historical issue pre your management time. How is that kind of shifted to where you're kind of operating to there, the trucks kind of right in line with maximum capacity and then historically, also, there was a fair bit of re-handle. Now that the open pit continues to mature, are you seeing relative to historical years the amount of re-handle or is that still kind of something that the West it really unlocks the potential of showing significant improvement on that front?

Hi, Mike. Go ahead, Larry.

Okay, sorry, I can speak to the truck payloads. It's something actually that's been ongoing for a couple years now as we've looked at the bodies that we had originally. With the 795s and looked at the kind of right waiting the trays and to get sort of increased payload. So we've always been focused on maximizing GBW and keeping within a fairly tight range. But with these as we continue to add the truck bodies, where we've increased payload by almost 2%, 2.5% here over the last maybe four quarters or so. So that's -- that probably gives you a bit of -- and we ask our shop operators, it's something we monitor very closely, ask them to make sure that we're paying close attention to maximizing payloads as well.

Okay, excellent. And just on the re-handle.

Oh, sorry. Yes, within the pit, there's very little re-handle. We really focus on establishing a good [indiscernible] and ramp system right off the bat. However, we do still have kind of historic levels of re-handle with [indiscernible]. And that's actually been fairly important for us to achieve these levels of mill throughput. So we --when we focus on our high intensity blasting in the ore zones, we can't do it everywhere. It's only in areas that are kind of safe, with respect to minimizing dilution. So we have to stockpile a fair bit of ore so that we can maintain a consistent blood going through the mill.

And is that something that if you have West Pit opened up, you can kind of bounce it off by doing ore in one, while waste in the other? Or is that not how you guys see it? You'll still be something to like, what you're kind of running at now.

Yes, we foresee a re-handle levels could be kind of inline with where we are currently.

Okay. All right. That's it for me, guys. Thanks very much and congrats again.

Our next question is from Fahad Tariq with Credit Suisse. Your line is open.

Hi, good morning. Thanks for taking my question. I'm just trying to get a sense of what will be incorporated into the next year, like a mine plan at detour. So it sounds like, obviously the year-end reserves will be part of that. Earlier in this call, there was something mentioned about potentially debottlenecking the back of the plant. Are those efforts, or that optimization, is that going to be factored into the plant as well? Or is that just potential further upside?

In terms of the -- all the stuff, we talked about the bottleneck in the plant that this is all part of the -- what's going [indiscernible] plant, which is being used to drive value. There's a lot of those in this, as I alluded to it, once we -- you got to be increase in size to trucks leads and increase maintenance capabilities, a lot of other initiatives in terms of like, sort of [indiscernible] grade control, improvements that we're working on. Natasha mentioned about blasting improvements. That's been an initiative for quite some time at Detour. Natasha, maybe you can give more color there?

Yes. So, yes, everything we see [indiscernible] strong growth in mineral reserves, and that we're well on the road to transforming Detour into one of the largest and most profitable gold mines. But in terms of what next year's reserves increase will look like the new mine plan will look like, yes, we will factor in all the improvements that we are working on. What Tony mentioned, the IPP was making was part of this past life of mine update as well. So that will get factored into -- get that mill running at a higher throughput that we anticipate. But there's still a lot of work to do from a life of mine perspective and we'll get through that in early next year.

But I mean, in the CIP plan, I mean if I -- if we could go back, we would have built a different style CIP plant [indiscernible] there, but we live at what we got. And we have people that think that people at the site have done a great job in terms of identifying areas that can be done for [indiscernible] any bottlenecks there.

Okay. Okay, got it. So it sounds like all of that is being factored in. Okay. Okay. And then just switching gears to Fosterville just quickly, you already spoke about grades. But just on throughput, obviously, throughput this quarter was quite strong. I'm just trying to figure out for Q4, because even if I keep throughput even flat or slightly down, you're going to be well ahead of even above 500,000 ounces for the year. So is that throughput level sustainable into Q4?

Go ahead, Natasha.

Yes, hi there. There is -- with Fosterville, yes, we are expecting to see some pretty decent throughput levels. We do have a shutdown coming up. But overall, I believe that we're projecting the grades in some of these areas that we're mining to be somewhat lower. Ion, do you want to provide any more color on that?

Yes. Sure, Natasha. So the mines really well sequenced at the moment with regards on top of the development [indiscernible] stoping. I think what we've seen so far is that with the impact of [indiscernible] coming on last year, and really embedded this year, and a lot of the work on site has gone into the production sequences themselves. We've seen the benefit of that now with the increased productivity of [indiscernible], and we expect that to continue on. And in fact, we would see ourselves improving our tonnage productivity over the coming years.

And, I guess, the other part in terms of the plant itself, I mean, you still have not achieved that plant is a 950 to -- 800,000 to 850,000 tons a year plus plant, right. So, it's not mill that's holding it back. It's mine product. And that's basically the [indiscernible].

Got it. Okay, that's it for me. Thank you.

We have no further questions at this time. I'll turn the call back over to Mr. Utting, for any closing remarks.

Well, thanks everyone, again, for taking part in our call today. As you heard, we have a very strong third quarter and a very strong first 9 months to 2021. And even more important we are positioned for a very strong finish and to finish the year with very well relative to our guidance. Looking further ahead, as I said, when I started we're very excited about the upcoming merger with Agnico Eagle and we're looking forward to 2022 as really a new leader in the gold mining industry. Thanks very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.